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In 1862 the immense increase of population in the north of England had surpassed the resources of the church, and in the large towns the numbers of the clergy were quite inadequate for the needs of the people. Sheffield, for example, had only one church for eight thousand inhabitants, and that town, like all its neighbours, was a centre of anti-clerical feeling. The archbishop from the first set himself to meet these difficulties. In 1865, at the church congress at York, he suggested the addition of a working men's meeting to the ordinary programme. In 1869 he gained the attention of the workmen of Sheffield, who had hitherto treated the clergy with scorn, by a speech defending the English church from the charge that it was a useless institution maintained at an undue cost to the nation. This speech was followed by others of like tenor. The population of Sheffield at once acknowledged the force of his argument, and their attitude of hostility or indifference to all that concerned the church was converted into one of devoted esteem for himself and his aims. His artisan admirers subscribed to give him a present of cutlery in 1883 (Yorkshire Post, 13 June 1883). His success in Sheffield was only typical of what he achieved throughout the labour centres of northern England. During the latter part of his life no man equalled him in the affections of the working classes, and it is difficult to overestimate the effect of his influence in strengthening the position of the English church in the northern province. He was one of the first English clergymen who, while not himself a socialist, recognised the good elements that went to the making of socialism. When he dissented from opinions which to most men then were revolutionary ravings, he did so without bitterness and with full allowance for differences in the point of view from which the question was approached.

From the time of his elevation to the bench of bishops Thomson took an important part in ecclesiastical legislation. One of the first problems that engaged his attention was the reconstitution of the final ecclesiastical court of appeal. He was thus involved in a prolonged controversy with Samuel Wilberforce, bishop of Oxford, who was ultimately victorious. At the outset in 1871 Thomson successfully opposed Wilberforce's proposal to reduce the bishops to the position of assessors in the judicial committee of the privy council; but in 1873 a clause was introduced into the Supreme Court of Judicature Act removing the episcopal members from the judicial committee altogether, and, though two years later they reappeared as assessors, they did not regain their judicial functions. In 1871, with John Jackson (1811–1885) [q. v.], bishop of London, Thomson introduced the Dilapidations Act, intended to compel the clergy to keep their residences and church buildings in repair. It was not, however, very happily framed, and some years later was condemned by a committee of the House of Commons. In 1874 he joined his friend Archbishop Tait in introducing a bill for the regulation of public worship. The measure was intended in part to check the growth of ritualistic practices, and in its original form largely increased the authority of the bishops; but the extensive modifications it received in its passage through parliament practically destroyed the effect that its framers had in view. In 1883 Thomson supported Tait's motion for the appointment of a commission on ecclesiastical courts. But, though he signed the general report of the commission, he joined with a minority in issuing a dissentient report, and was the author of a severe criticism on the work of the commission which appeared in the ‘Edinburgh Review’ for January 1884.

A strict disciplinarian, Thomson came conspicuously forward in 1887 as the champion of ecclesiastical order. He had refused to admit Canon Tristram's election as a proctor in convocation, on the ground that he was not duly qualified. In consequence he was required to show cause in the court of queen's bench why Tristram's election should not be accepted. Thomson conducted his case in person, and, appearing before the court on 28 Nov. 1887, took exception to the court's jurisdiction. His pleading was successful, and the ability he displayed led Lord Coleridge, who tried the case, to remark, ‘Had Thomson followed our profession he would have been the second person in the kingdom instead of the third.’

In 1888 the Clergy Discipline (Immorality) Bill was introduced into parliament. It was materially altered in committee, and Thomson, disapproving of it in its amended form, hastened to London to oppose it on the third reading in the House of Lords. He pointed out that it tended to increase the cost of prosecution, and at the same time prevented an appeal to a higher court on matters of fact. No attempt was made to controvert his statements, and the bill, after passing the third reading, was suffered to drop. Another bill dealing with the same subject, which was more in accordance with his views, was introduced in the year following, but was successfully opposed by the Welsh members in the House of Commons.